The Persistent Inequality of Neighborhoods

The places we’re born have a profound influence on our ability to move up the economic ladder.

America’s surging economic inequality has been blamed for everything from crony capitalism to the displacement of once good-paying jobs by globalization and new technology. But according to a major recent study, the real culprit in both the growing gap between the rich and poor can be traced to the neighborhoods in which we are born and raised.

The study, which expands on the crucial ongoing work of the Harvard sociologist Robert J. Sampson and included in a larger economic mobility report from the St. Louis Fed, examines the rise of neighborhood inequality and its effects on the economic mobility of Americans. The study asks two basic questions: “How mobile are neighborhoods?” and “How mobile are individuals across neighborhood income types?” It draws on Census data for neighborhoods across the U.S as a whole from 1990 to 2012, and even more detailed data from the 2014 Mixed-Income Project (MIP) to track the effects of neighborhood location on the life trajectories of people in two of America’s largest cities: Chicago and Los Angeles.

The study examines and compares two key measures of neighborhood income status—median family income and the “degree of mutual exposure of lower- and higher-income persons”—for Census tracts or neighborhoods in these two cities.

Neighborhood poverty is persistent over time

First and foremost, neighborhood poverty is stubbornly persistent across time. Across the nation as a whole, roughly 80 percent of poor neighborhoods in 1990 remained so in 2000, and 75 percent of poor neighborhoods in 2000 remained so in 2012. In Chicago and L.A., virtually no neighborhoods went from the bottom fifth to the top fifth of the income distribution. Just 5 percent of Chicago’s high-poverty neighborhoods managed to improve to the top two quintiles, and a mere 2 percent of L.A. neighborhoods did so. The stark reality is that poverty is persistent and that neighborhoods at the very bottom of the economic order function more or less as poverty traps.

There is a similar persistence of affluence at the very top of the economic order. Very few affluent neighborhoods fell markedly down the economic strata. Across the United States, 80 percent of affluent neighborhoods in 1990 remained affluent two decades later. In Los Angeles, 87 percent of affluent neighborhoods in 2000 remained so in 2010. In Chicago, that figure was 77 percent.

Sampson also finds little evidence that gentrification has made much of a dent on persistent poverty—less than three percent of U.S. neighborhoods in the bottom two income categories during the 1990s and 2000s moved above the 60th percentile. And, a relatively small amount (50,000 neighborhoods) climbed from the bottom level to the top.

As Sampson points out:

These findings militate against the idea that income inequality is somehow recent at the neighborhood level or that neighborhoods have radically repositioned themselves. Just as individual income mobility has been fairly low for some time, the odds of neighborhood-level upgrading are relatively low, and persistent neighborhood inequality has existed for decades.

The upshot is that America suffers from a neighborhood inequality of “concentrated extremes” that persist over long periods of time. In both cities, 90 percent of individuals who grew up in an affluent neighborhood stayed at or near the top, and fewer than 10 percent of those who started in poor neighborhoods were able to climb to these affluent places.

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This is the case despite deep changes in our economy and society spanning the Great Recession, rising inequality, and a substantial fall-off in urban crime. “The facts on individual income mobility are crucial, of course, but they tell only half the story,” Sampson writes. “The other half pertains to the prospects of change in one’s community of residence: individuals are born into, grow up in, and become adults in neighborhoods that are also highly unequal.”

On a more positive note, Sampson finds evidence of some mobility or “fluidity” among middle class neighborhoods. On this score, both Chicago and L.A. outperformed the national average. That said, 37 percent of Chicago’s neighborhoods and 47 percent of L.A.’s remained in the middle-income group over the span of two decades. However, he notes that middle-income neighborhoods have become increasingly vulnerable over time and that the once vibrant middle of America’s neighborhood geography has essentially hollowed out. In other words, America’s neighborhood inequality is defined by the juxtaposition of concentrated disadvantage and concentrated advantage at the extremes, and worsening precariousness in the middle.

Race shapes economic advantages and penalties in neighborhoods, even when controlling for key factors

Race plays a huge role in neighborhood inequality, according to Sampson. Despite predictions of the declining role of race and of the rise of a post-racial society, Sampson also finds neighborhood poverty and inequality to be inextricably linked to race. To get at this, he looks at the relationship between neighborhood income and race/ethnicity over time, controlling for factors such as immigrant generation, education, employment, family income, household size, home ownership, and marital status. He finds a clear economic advantage for white neighborhoods and an economic penalty for black neighborhoods.

Blacks in Chicago ended up with almost $19,000 lower median income than whites, and about $8,000 less in L.A., after controlling for baseline neighborhood incomes. As Sampson points out, “white privilege in neighborhood status is maintained after controlling for the classic mobility-related features of individual background, residential mobility and the macro effects of the Great Recession.” Black neighborhoods are exposed to greater poverty, more unemployment, and more crime and disorder than white neighborhoods. Ultimately, “racial inequality in exposure to low-income neighborhood environments is so strong that high-income blacks are exposed to greater neighborhood poverty than low-income whites.”

Poverty policies can be “people-oriented” and “place-oriented”

Sampson also takes a close look at what can be done to remedy America’s neighborhood inequality. He divides our current approach to poverty into two main buckets. One the one side are “people-oriented” policies, favored by many economists, that aim to move people, particularly young people, out of disadvantaged places and relocate them to neighborhoods with better schools and public services. A recent study found that these people-oriented strategies can work: The children of families who used vouchers to move from higher to lower poverty neighborhoods had higher adult earnings, though this effect was much greater for children who moved at a very young age. On the other side are “place-oriented” policies that seek to build up disadvantaged neighborhoods and make them better and stronger.

Sampson argues that we need to implement both, and I agree. The short-term solution would be to expand existing people-oriented policies, which would allow talented kids to avoid the negative effects of their old neighborhoods. The longer-term strategy would be to support more substantial investments to improve disadvantaged neighborhoods. As Sampson points out: “What poor residents seem to want most is not to move but simply to have their communities revitalized.”

To make this possible, Sampson argues in favor of what NYU’S Patrick Sharkey has dubbed “durable investments” in neighborhoods—large-scale interventions in education, health, employment, crime-reduction, community social services, and the whole gamut of strategies required to combat the long legacy of persistent disadvantage in these places. Sampson makes an especially powerful case for what he calls “affirmative action for neighborhoods,” which would involve things like cash assistance or reduced taxes rates for residents in poor or historically disadvantaged areas.

Although America has long been considered the land of opportunity, opportunity hasn’t been equal for quite some time, if ever. As the middle has fallen out of our cities, inequality is baked into our increasingly divided geography. “The salience of neighborhood difference has persisted across long time scales and historical eras,” concludes Sampson, adding that “spatial arrangements constitute a fundamental organizing dimension of social inequality.” In other words, where we end up in life largely depends on where we were born.

About the Author

Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate.